Security National Automotive Acceptance Company (SNAAC) was issued a consent order by the Consumer Financial Protection Bureau today, claiming the lender did not properly repay military service members harmed in a 2015 consent order from the bureau, and instead rewarded “worthless credits” to the consumers.
“This company violated a Bureau order when it failed to get money back to servicemembers it had hounded with illegal debt collection tactics,” said CFPB Director Richard Cordray. “We are making sure this company finally rights its wrongs.”
SNAAC offered to “pay all the disputed amounts in order to move forward,” after it discovered there was an issue with the refunds from the 2015 consent order, but the CFPB declined, and instead opened an inquiry, the lender said in a statement sent to AFN.
SNAAC said it fully cooperated with the investigation and has decided to pay all fees “without admitting” to the CFPB’s findings.
The CFPB is now ordering SNAAC to not only properly pay more than $1.65 million in cash refunds and credits to more than 1,000 military service members, but is adding an additional $1.25 million penalty which will go to the CFPB Civil Penalty Fund.
SNAAC’s specific breakdown in payments includes roughly $720,000 to the CFPB — which the bureau will send as refunds to about 925 consumers — about $370,000 in new credits to consumers with remaining account balances, and proper credit to roughly 1,000 servicemembers making payments under settlement agreements. SNAAC must also pay $75,000 to the Bureau to cover the costs of distributing these payments.
In 2015, under the first consent order, SNAAC paid $1 million into the Civil Penalty fund and was ordered to pay $2.275 million to 2,200 consumers in redress. Only about half of that refund to consumers, was considered legitimate by the CFPB.
The 2015 consent order sought compensation for aggressive collection tactics against consumers who fell behind on their loans, including threatening to contact — and in some cases actually contacting — the service member’s chain of command about their debts, as well as exaggerating the consequences of not paying.
SNAAC submitted two plans that claimed to provide the full amount of redress ordered, however, both plans were designed to underpay the consumer, the CFPB alleges.
The bureau says the Mason, Ohio-based lender gave “worthless credits” to consumers who had already paid off their loan in full, rather than giving them cash refunds. The credits were also issued to consumers who discharged their debts in bankruptcy, no longer owed SNAAC money for an auto loan, and thus received no benefit from the credits.
Furthermore, consumers who were still paying an auto loan after the settlement were given credits based on the original, higher account balance, rather than the amount agreed upon after the settlement. As a result, SNAAC issued credits that exceeded settlement balances, and some consumer unknowingly overpaid to settle the account.
Navy Federal Credit Union and Santander Consumer USA have also received consent orders in recent years for violating the Servicemember Civil Relief Act, and these sorts of violations may still be happening in the industry, said Jenny Lee, trial partner at Dorsey & Whitney LLP and a former CFPB official.
“Usually if there is a military population, it seems common for the industry to call military chain of command and indicate, ‘Private so and so seems to be falling behind, we have a problem here, can you get on his case to pay his bill,’” Lee told Auto Finance News during a meeting at CBA Live. “There is a whole history of department of defense regulations that has allowed this to be a practice that happens.”
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